Wednesday, January 13, 2010

The Future of Movies

The world of recorded arts is coming to an important crossroads as we enter the second decade of the 21st century. Film has been around for over 100 years, recorded music more than 75, and mass broadcast television for over 60. Even the "written word" is finding itself having to evaluate how it will survive over the next 10-20 years.

I'm not saying that any of these are in trouble. I'm not even saying that the way these arts are produced by artists is having issues. This discussion is not about the artistic side of filmmaking. It is all about the business of movies. And that business is rapidly changing.

In the not too distant past movies were only available as strips of cellulose run over a light and projected on a large screen with the help of a lense. This made movies only available to the people who had the means and the equipment available to project these films in a darkened room. There was no after market for films. Movies in the 20s were made and were easily translated for many countries because there was no soundtrack, these movies would play for years moving around the world to mass audiences in even remote places to earn a profit.

With the advent of television, movies could now be recorded to a video tape and broadcast over the air to millions of viewers who watched these images play through a cathode ray tube. Viewers not only watched movies, but they also consumed new, original weekly programming mimicking the radio programs popular in the 20's, 30's and 40's. They wouldn't have to save their pennies to go to the local theater to watch their favorite serial any longer. TV shows could give them the same type of entertainment and do it for free by using advertising to turn a profit.

When the film audience diminished because more of them stayed home to watch television, the movie studios fought back with color films, widescreen, and even flirted with 3D. These things helped to distinguish film just enough from television that audiences began to come back. Even when television introduced color the audiences would still go out to the theater to see the newest film.

That's the way the movie business has been for more than 50 years with relatively little change. As television improved, studios would pump more and more money into their releases, making bigger effects, hiring the most desired actors, and using television as a primary vehicle to advertise their films.

Today the buzzword in film and other recorded arts is digital. With music, we no longer buy record albums or even CDs. We're beginning to watch television at web sites offering video on demand services. Movies are being delivered to your home through the internet as well, but this still has yet to really catch on. The way we receive our media is changing, and changing fast.

Where does this leave the movie industry? In recent years, the industry has been bolstered by DVD sales. During the years when the profits from movie theaters declined, the movie industry could brag about home video sales. But in 2009 DVD sales dropped 13% from 2008. DVDs are no longer the cash cow they were 5 years ago.

Except for 2009 (which was a record year for Hollywood), box office has been flattening out throughout the first decade of the 21st century. This isn't to say that Hollywood has lost money; I don't know if they have or not. But ticket prices have risen faster than box office, which means Hollywood is seeing diminishing returns when you account for inflation.

This flattening trend is easy is easy to detect when looking at actual numbers. Avatar and The Dark Knight have been huge money makers. But if you dig into the details of the profits from those films, you'll see that when you account for inflation, The Dark Knight no longer ranks 3rd in all time domestic box office, but 27th. Avatar even drops more dramatically to 52nd (according to Box Office Mojo on the date of writing this article). This doesn't even begin to take into account the huge cost of these films incurred by the studios.

The way the movie industry has operated for 100 years seems to be coming to a close. The rise of high definition television and internet distribution may just be the nail in the coffin for multiplexes around the world. There are already many people who wait for the Blu-Ray release of Hollywood blockbusters, and with the advent of HD internet distribution more and more will choose to consume movies at home.

There also seems to be a trend towards a loss of older theater goers. The latest interest in 3D is being driven by younger movie consumers. The studio films seem to be skewing younger and younger. Just recently Sony studios decided to re-boot Spider-Man, a billion dollar movie franchise, and put the hero back in high school. There can be little doubt that the studios' main concern is to grab the younger viewers since they're the ones consistently spending money at the movies.

With younger people being the driving force behind box office, movies are in real trouble. Younger people are not the ones with the money, their parents are. At some point, as a night at the movies increases in price, parents may become less willing to shell out $20 to $30 for a movie and some snacks. Younger audiences also tend to be more fickle than older ones, meaning the income from younger movie goers could dry up quickly if movies become passe to a younger generation.

Movie studios, like the music industry, are going to have to take notice of streaming their properties over the internet in the very near future. Internet distribution will become the primary way that a majority of entertainment consumers will watch film and TV. Ticket and popcorn prices will continue to rise further spreading the consumer entertainment dollar thinner and thinner. The movie studios' only option will be to compete for the crowded home market, which will also include competition from smaller companies taking advantage of the easy distribution model the internet offers.

Obviously this trend will not occur overnight. Movies like Avatar show that people are still willing to pay the prices (even the "3D tax") being demanded at the box office. But devices like the Roku player, the latest video game consoles, and HD televisions and Blu-ray players that access internet content, will continue to eat into the profits of big box office productions.

History is filled with analysts predicting the end of movie theaters. Somehow, movies have always found a way to keep ahead of the curve and continue to rake in the cash. But with the high quality and lowering prices of HD televisions, and the easier distribution of HD content over the internet, the movie industry is about to face it's most difficult challenge. It will take a long time for this to occur, of course, but like any technology avalanche, once it brgins, there will be no stopping it.

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